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3rd Circuit: Plaintiff must arbitrate debt adjustment allegations
On March 24, the U.S. Court of Appeals for the Third Circuit determined that a plaintiff must arbitrate proposed class claims brought against a debt resolution law firm. The plaintiff alleged the law firm engaged in racketeering, consumer fraud, and unlawful debt adjustment practices in violation of various New Jersey laws. The district court denied the firm’s motion to compel arbitration, applied the law of the forum state, New Jersey, and ruled that the arbitration provision was invalid and unenforceable. The law firm appealed, arguing, among other things, that the arbitration provision would have been found valid if the district court had applied Delaware law in accordance with the parties’ 2013 professional legal services agreement. On appeal, the 3rd Circuit disagreed with the district court, holding that the arbitration provision demonstrated that the plaintiff gave up her right to litigate her claims in court, despite there appearing to be a true conflict between Delaware and New Jersey law. The appellate court concluded that the arbitration clause met the standard set forth in Atalese v. U.S. Legal Services Group, L.P., which held that an arbitration provision “will pass muster if it, ‘at least in some general and sufficiently broad way,. . .explain[s] that the plaintiff is giving up her right to bring claims in court or have a jury resolve the dispute.’” Moreover, the 3rd Circuit noted that the arbitration provision was also sufficiently broad enough to reasonably encompass the plaintiff’s statutory causes of action.
New York law prohibiting paper billing statement fees is an unconstitutional restriction of commercial speech
On March 16, the U.S. District Court for the Northern District of New York dismissed a putative class action with prejudice over whether a national bank violated state law by charging a fee for paper billing statements in certain circumstances. The consumer’s suit alleged violations of N.Y. Gen. Bus. Law § 399-zzz as well as N.Y. Gen. Bus. Law § 349, which prohibits deceptive acts and practices. The bank argued, among other things, that (i) the consumer’s § 399-zzz claim was preempted by the National Bank Act (NBA); (ii) the consumer’s interpretation of § 399-zzz “would prevent [the bank] from exercising its federally authorized power to charge non-interest fees”; (iii) § 399-zzz is unconstitutional under the First Amendment because it limits the bank’s communication of fees and pricing to consumers; (iv) the statute does not apply to national banking institutions like the defendant; and (v) the statute does not prohibit the conduct at issue. The court disagreed, ruling that § 399-zzz is not preempted by the NBA because paper statement fees are not limited to only banking institutions. Moreover the court determined that the state statute is a rule of general application and “does not prevent or significantly interfere with [the bank’s] exercise of its powers.” However, the court ultimately dismissed the consumer’s action, agreeing that § 399-zzz constitutes an unconstitutional restriction on the bank’s First Amendment right of commercial speech under intermediate scrutiny. According to the court, § 399-zzz regulates “how businesses can communicate their fees” by “prohibit[ing] businesses from charging consumers for receiving a paper statement” but permits businesses “to offer consumers a credit for receiving an electronic statement instead of a paper statement.” The court also ruled that the consumer failed to state a claim for a deceptive act or practice because §399-zzz unconstitutionally infringes on the bank’s First Amendment rights.
3rd Circuit: Debt collection letter with invitation to call does not violate FDCPA
On March 16, the U.S. Court of Appeals for the Third Circuit affirmed a district court order granting summary judgment in favor of a defendant debt collection agency after concluding that a letter inviting recipients to call to “eliminate further collection action” did not deceive debtors. The plaintiff brought the putative class action lawsuit under the FDCPA claiming the defendant’s letter deceived debtors by making them think a phone call is a “legally effective” way of ending collection activity. The plaintiff also argued that the letter raised uncertainty about a debtor’s right to dispute a debt in writing. According to the plaintiff, because the letter placed the invitation to call above an acknowledgment that recipients can also respond in writing, debtors were left uncertain about which format to use. The district court disagreed and granted summary judgment to the defendant.
On appeal, the 3rd Circuit reasoned that the letter was not deceptive. According to the appellate court, the defendant never said “explicitly or implicitly[] that the phone call would, by law” end collection efforts. Further the letter did not create any confusion about whether a debtor should call or write to exercise their rights. Finally, the court rejected the argument that the order of paragraphs in the letter created confusion.
Non-signatory may not arbitrate privacy claims
On March 9, the U.S. District Court for the Southern District of New York denied a global technology company’s motion to compel arbitration in a putative consumer privacy class action, ruling that the technology company is not party to a co-defendant telecommunications company’s terms and conditions, which require consumer disputes to be arbitrated. The proposed class alleged that the defendants “engaged in false, deceptive and materially misleading consumer-oriented conduct” in violation of state law “by ‘failing to disclose that its practice of recycling phone numbers linked to SIM cards, and selling those SIM cards to consumers without requiring prior users to manually disassociate their [] IDs from the phone numbers associated with the recycled SIM cards, did not protect the privacy of users’ data and confidential personal information.’” The defendants moved to compel arbitration based on arbitration provisions contained in the telecommunications company’s terms and conditions.
The court first reserved its decision on one of the plaintiff’s claims because there was an open question as to whether the plaintiff received a copy of the terms and conditions at the time the plaintiff purchased the SIM card. With respect to the other plaintiff’s sole claims against the technology company, the court ruled that the technology company cannot enforce an agreement to which it is not a party. “This general rule stems from the principle that arbitration is a matter of consent, since ‘no party may be forced to submit a dispute to arbitration that the party did not intend and agree to arbitrate,’” the court said. The court also ruled, among other things, that the plaintiff’s claims “do not allege any interdependent or concerted misconduct by” the defendants, and as such they are not so entangled that the plaintiff must arbitrate his claims against the non-signatory technology company.
Court approves $9.7 million overdraft fee settlement
On February 25, the U.S. District Court for the Northern District of New York approved a roughly $9.7 million class action settlement resolving claims that a New York credit union improperly assessed banking fees, including overdraft fees, when members had sufficient funds in their checking accounts to pay for the transactions presented for payment. The plaintiffs also alleged, among other things, that the credit union (i) improperly charged fees on a variety of transactions for members who did not opt-in to the credit union’s protection programs; (ii) assessed fees in instances where there was no contractual basis to assess the fees; (iii) transferred money from members’ savings accounts into checking accounts to avoid negative balances and resulting fees, but still imposed the fee; and (iv) violated the terms of its contracts and various laws by imposing non-sufficient funds fees more than once on the same transaction. The settlement requires the credit union to pay approximately $5.85 million into a settlement fund, plus nearly $2.53 million in attorneys’ fees, $168,030 in costs, and $15,000 service awards to each of the three named plaintiffs. The settlement amount also includes the value of the policy changes to be made by the credit union.
Court approves $650 million biometric privacy class action settlement
On February 26, the U.S. District Court for the Northern District of California granted final approval of a $650 million biometric privacy settlement between a global social media company and a class of Illinois users. The settlement resolves consolidated class action claims that the social media company violated the Illinois Biometric Information Privacy Act (BIPA) by allegedly developing a face template that used facial-recognition technology without users’ consent. A lesser $550 million settlement deal filed in May (covered by InfoBytes here), was rejected by the court in August due to “concerns about an unduly steep discount on statutory damages under the BIPA, a conduct remedy that did not appear to require any meaningful changes by [the social media company], over-broad releases by the class, and the sufficiency of notice to class members.” (See InfoBytes coverage here.) The final settlement requires the social media company to pay $650 million in a settlement fund, plus $97.5 million for attorneys’ fees and expenses and $5,000 service awards to each of the three named plaintiffs. The social media company is also required to provide nonmonetary injunctive relief by setting all default face recognition user settings to “off” and by deleting all existing and stored face templates for class members unless class members provide their express consent after receiving a separate disclosure on how the face template will be used. Face templates for class members who have not had any activity on the social media platform will also be deleted. The court called the settlement a “landmark result,” noting it is one of the largest settlements ever for a privacy violation, and will provide each claimant at least $345.
Convenience store chain agrees to pay $12 million to resolve data security incident
On February 19, consolidated class members filed an unopposed motion for preliminary approval of a settlement agreement in the U.S. District Court for the Eastern District of Pennsylvania to resolve data security incident claims. Class members—comprised of a nationwide group of consumers whose credit and debit card information was compromised in a 2019 data security incident affecting a nationwide convenience store chain—alleged that “despite the foreseeability of a data breach” the convenience store chain, among other things, “failed to implement adequate measures to protect the sensitive, non-public payment card information entrusted to it by its customers.” The claims also alleged that certain class members continued to experience fraudulent transactions on their payment cards, and that many class members spent time responding to the data security incident, spent money on protective measures, and may experience a heightened risk of future misuse of their payment card information.
Following mediation, the parties agreed to the preliminary settlement terms, which will provide monetary relief to class members through a three-tier system totaling up to $9 million, plus $3.2 million for attorneys’ fees and expenses and class representative service awards. The convenience store chain is also required to take additional measures for a period of two years to prevent future unauthorized intrusions, including (i) retaining a qualified security assessor; (ii) conducting annual tests of its cybersecurity protocols; (iii) operating payment systems that encrypt payment card information and comply with credit card issuers’ security procedures, including systems at point-of-sale fuel pump terminals; and (iv) maintaining information security programs, policies, and procedures.
Court holds satellite provider not liable for telemarketer’s calls
On February 12, the U.S. District Court for the Northern District of Georgia granted summary judgment in favor of a satellite TV company as to a class action’s TCPA claims, concluding that the company was not liable for its telemarketing service provider’s cold calls. As previously covered by InfoBytes, a consumer filed a class action against the company alleging that the company failed to maintain an “internal do-not-call list,” which allowed the company and its telemarketing service provider to contact him eighteen times after he repeatedly asked to not be contacted. The consumer sought certification “of all persons who received more than one telemarketing call from [the telemarketing service provider] on behalf of [the company] while it failed to maintain an internal do-not-call list.” The district court certified two representative classes: the Internal Do Not Call (IDNC) class and the National Do Not Call (NDNC) class. The company appealed the IDNC class and the U.S. Court of Appeals for the Eleventh Circuit vacated the district court’s certification of the IDNC class. The company then moved for summary judgment on the certified NDNC class claims and plaintiff’s individual IDNC claim.
Upon review, the court granted summary judgment in favor of the company concluding that there was no evidence that (i) the cold calls were made by the telemarketing provider within its actual authority from the company; (ii) the company made representations sufficient to give the telemarketing provider the apparent authority to make the cold calls; or (iii) the company ever ratified the cold calls. Specifically, the court noted that not only did the company “categorically ban[] all residential and cellular cold calls,” it also “regularly issued reminders that [the telemarketing provider] was required to continue implementation of national-do-not-call procedures in compliance with the TCPA.”
Bank reaches $5.2 million settlement in ATM fee class action
On February 3, consolidated class members filed an unopposed motion for preliminary approval of a settlement agreement in the U.S. District Court for the Southern District of Ohio to resolve allegations that a national bank breached its account agreement by assessing balance inquiry fees in certain circumstances. Class members, comprised of current and former account holders, claimed that the bank assessed fees if account holders used an ATM outside of the bank’s network (non-bank ATM) to check their balances. The class also alleged that the bank assessed multiple fees if a balance inquiry was undertaken “during the same ATM visit as a cash withdrawal or other funds transfer.” As a result of the action, the bank modified its account disclosures to “better inform its customers that they could be charged a fee for a balance inquiry” at a non-bank ATM. The preliminary settlement seeks to certify class members who were assessed the contested fees from January 1, 2010 through October 31, 2018 and will not require class members to file claims to receive the settlement’s benefits. Under the preliminary settlement terms, the bank will pay $5.2 million into a common fund, and has agreed to analyze its historical transaction data to identify settlement class members and automatically credit settlement proceeds into their accounts via direct deposit.
State AGs oppose proposed settlement in FDCPA processing fees class action
On January 29, a coalition of state attorneys general from 32 states and the District of Columbia, led by the New York AG, filed an amicus brief in the U.S. District Court for the Southern District of Florida opposing a proposed settlement in a class-action FDCPA suit against a mortgage servicer that allegedly charged “processing fees” or “convenience fees” for mortgage payments made over the phone or online. The plaintiffs filed the lawsuit last March claiming the defendant did not charge processing fees if borrowers made payments by check or signed up for automatic monthly debits from their bank accounts. They further argued that the processing fees were “illegal and improper because neither the mortgages themselves nor applicable statutes authorize such fees.” The parties agreed to mediation in April, and a motion for preliminary approval of a settlement was filed in August.
In their brief, the AGs outlined concerns with the proposed settlement, including that (i) the relief provided to class members violates various state laws, and that the defendant seeks to ratify fees in an “unwritten, mass amendment” that violates state laws and regulations; (ii) the class members only receive an “inadequate” one-time payment, while the defendant may continue to charge excessive fees for the life of the loan; and (iii) low- and moderate-income borrowers are not treated equitably under the proposed settlement. Additionally, the AGs emphasized concerns “about the speed with which this case was settled,” arguing that entering into the proposed settlement quickly during the Covid-19 pandemic has deprived the court and the AGs “of the ability to determine the adequacy, fairness and reasonableness of the settlement.”